Markov Regime Switching of Stochastic Volatility Lévy Model on Approximation Mode
Author
Source
Journal of Applied Mathematics
Issue
Vol. 2013, Issue 2013 (31 Dec. 2013), pp.1-9, 9 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2013-12-04
Country of Publication
Egypt
No. of Pages
9
Main Subjects
Abstract EN
This paper deals with financial modeling to describe the behavior of asset returns, through consideration of economic cycles together with the stylized empirical features of asset returns such as fat tails.
We propose that asset returns are modeled by a stochastic volatility Lévy process incorporating a regime switching model.
Based on the risk-neutral approach, there exists a large set of candidates of martingale measures due to the driving of a stochastic volatility Lévy process in the proposed model which renders the market incomplete in general.
We first establish an equivalent martingale measure for the proposed model introduced in risk-neutral version.
Regime switching of stochastic volatility Lévy process is employed in an approximation mode for model calibration and the calibration of parameters model done based on EM algorithm.
Finally, some empirical results are illustrated via applications to the Bangkok Stock Exchange of Thailand index.
American Psychological Association (APA)
Intarasit, Arthit. 2013. Markov Regime Switching of Stochastic Volatility Lévy Model on Approximation Mode. Journal of Applied Mathematics،Vol. 2013, no. 2013, pp.1-9.
https://search.emarefa.net/detail/BIM-480658
Modern Language Association (MLA)
Intarasit, Arthit. Markov Regime Switching of Stochastic Volatility Lévy Model on Approximation Mode. Journal of Applied Mathematics No. 2013 (2013), pp.1-9.
https://search.emarefa.net/detail/BIM-480658
American Medical Association (AMA)
Intarasit, Arthit. Markov Regime Switching of Stochastic Volatility Lévy Model on Approximation Mode. Journal of Applied Mathematics. 2013. Vol. 2013, no. 2013, pp.1-9.
https://search.emarefa.net/detail/BIM-480658
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-480658